Comments on books, the business of books, mysteries and more

February 07, 2014

Adventures in bookselling: Values

On September 2, four days after the start of the Fall semester, the Kenyon College Bookstore still had two copies of RITOS DE INICIACION by Grinor Rojo and Cynthia Steele in stock. First published in 1986, this book is still required for Spanish 321, as it has been at Kenyon for several years in one Spanish class or another. What’s changed is that the book has been out of print for the last two years or so. Increasingly, for cost and pedagogic reasons, faculty are using old editions and out of print titles, but this can create sourcing challenges. The big used text suppliers usually don’t stock old editions and out of print titles; by definition, these aren’t available new from publishers either. We end up searching high and low throughout the internet to meet the needs of our students.

For Fall 2013, the bookstore was able to find a reasonable number of copies at reasonable prices, though our stock was on the low end of our expected sales range. So we were trying to keep an eye on sales and enrollment, and on our options should more students ask for the book. On September 2, we felt there was a good chance that we would need more than the two copies still on our shelves. Our retail price for the used copies we found was $29.00. When we checked online, the least expensive copy available on that day was being offered on Amazon for $225.45.

Welcome to the brave new world of textbooks, where dynamic pricing is fast becoming the new normal.

When folks ask why books sometimes cost less online than they do in the bookstore, they’re comparing apples and oranges. If you’re looking at a class of, say, 35 students and you’re looking at a book that we have priced at $100 and it’s a book that’s been in use here and elsewhere for a couple of years already, then it’s very likely that you’ll be able to find a copy priced at well under $100. But take a close look at the listings, on Amazon, half.com, abebooks.com, alibris or any of the other sites that represent our competition. The first listing might be $30.00. The next listing might be $33.15. The third listing might be $41.69. By the time you get to the 35th listing – the number of books that we need to cover expected sales – you might perhaps see a price of $222.48. Copy number one is apples; 35 copies is oranges. If you’re student #35, the bookstore’s $100 price – a midpoint price based on our sourcing costs and a standard markup – might be looking pretty attractive.

The least expensive copy of RITOS that we found cost $4.99, sourced through the internet, and the most we paid was $42.00 to a traditional used text vendor who happened to still have one copy left in its warehouse. We set our retail price at $29.00 based on our overall average cost and our usual target margin. Once we set that price, we held to that price, even when the market went crazy and pushed the price up beyond what most anyone would find reasonable. It’s been the policy of this store to set a price for the semester and then hold it for the semester. In other words, we would not penalize a student who came in late still needing copy of a book, even if we ran out and it cost more to restock. (It always costs most to restock, if for no other reason than freight charges.) But the increasingly dynamic marketplace and the increasing use of out of print titles are making it harder and harder to maintain this policy. When a student came in on September 25 looking for a copy of RITOS, we quoted a price in the mid-$40s, the lowest price we could find. We did not add in a markup for the bookstore.

For decades, the used text industry followed a rigid pricing model. For a book with a publisher’s suggested retail price of $100.00 for a new copy, the used copy would retail for 25% off -- $75.00 -- and the used text wholesalers would sell it to college bookstores for 50% to 67% off -- $33.00 to $50.00. If a book went out of print, the industry moved on to a new edition or to another title. All of the wholesalers and most all college bookstores (including Kenyon’s) followed this model. But when we’re using old editions and out of print titles, a percent off from the new price model makes no sense, and our new economy competition, led by Amazon, isn’t bound by traditional pricing practices. These folks are treating texts like commodities, adjusting prices constantly – down and up. Today, February 7, the least expensive copy of RITOS on Amazon is $49.20 plus shipping; copy #10 is going for $101.79.

No one has suggested that the Kenyon College Bookstore start pricing the way our online competition is pricing – copy by copy. But as I’ve noted, we’ve already abrogated our previous policy of holding the price steady through the semester, charging more for the more expensive copy we brought in a month after the semester started. We didn’t like it, but the options aren’t good: 1) stick to the original price and lose money on this transaction, 2) help the student get the book she needed and only recover our cost, or 3) apply our usual markup and charge the student what would have been a stiff premium over our start-of-semester price.

We chose the middle option, and we are likely to continue this strategy in the future – set a start-of-semester price, hold this price through rush into the first couple weeks of the semester, and then move to market pricing. But this begs the question. Why shouldn’t the bookstore price all copies of all titles individually all the time? If the first copy of RITOS cost about $5.00 and our target margin is 30%, then the retail price of that copy could be $7.14. If the second copy cost $8.00, the same calculation leads to a selling price of $11.43 for that copy. And so on. The last copy of RITOS cost $42.00; we’d price that copy at $60.00. The first student to shop for that book might feel pretty good about the price. The last student, not so much.

Of course, no one would really be happy with this system. In a store like ours, students expect each copy of each required text to cost the same. Actually, we already accept that the new copies will cost more than the used copies, but otherwise, we all believe that store prices are supposed to be the same. But why? Our competition online is charging different prices based on different costs or on different assessments of what marketplace sellers need to get for the product. Sometimes those outfits are just changing prices for the sake of changing prices; a recent analysis showed that Amazon changes 2.5 million prices each day. If this is how our competition is behaving, does our fixed price model still make sense? If faculty and students alike are asking us why a book is so much cheaper online than it is in the bookstore, aren’t they really asking us to be more like those other sellers?

Actually, they’re not. In his 2012 book WHAT MONEY CAN’T BUY, Michael Sandel challenges us to think about situations where “market values have crowded out nonmarket norms.” For example, the market may be efficient, but is it the right way to decide who should receive a donated liver or other organ? Sandel argues that there are moral limits to markets, that sometimes other values should take precedence over market values.

That’s why no one would be happy if the bookstore started dynamically pricing each copy of each book. Providing textbooks to the students who need them is one of those nonmarket situations, especially in the context of a nonprofit college store owned by the institution. We believe that it’s more important to treat all students equitably, to set a reasonable price based on our costs and to charge that same price to all. The market creates winners and losers, but we are about something more. Even if the value of a book happens to skyrocket in the marketplace, we continue to make our stock available to our students at our original price, instead of offering it for sale online to the rest of the world at the prevailing market price. We might have made more money on RITOS if we sold it online -- the store might be said to “win” in this situation -- but our students would lose out. Like any retailer, we get the whole maximizing profit thing. But other values take precedence, for us and for the community we serve.

Beautifully stated and right on the mark. Thanks for sharing and articulating these issues, and for the link. I plan on sharing that link with a number of people who would profit from this explication and otherwise might not see it.

Great explanation on bookstore pricing! We do not even have the option of using Amazon; however, this is something that I would love to give to my instructors that insist on telling students to go online instead of supporting the bookstore.